To me, there are far too many other culprits for the financial crisis and bailouts who either have been lionized or too easily forgiven. Jamie Dimon at J.P. Morgan Chase & Co.
JPM, +0.43%
and Brian Moynihan at Bank of America Corp.
BAC, +0.61%
are two who come to mind in the private sector. Alan Greenspan, the former Federal Reserve chairman, and Christopher Cox, the former head of the Securities and Exchange Commission, are public sector examples.

Had Fuld’s Lehman Brothers Holdings Inc. been saved in the bailouts, chances are he’d probably would have held onto his job like Dimon, or Lloyd Blankfein at Goldman Sachs Group Inc.
GS, +0.17%
.

Still early days in market rally

(4:18)

Jack Hough of Barron's previews the latest issue of Barron’s, which looks at value funds in disguise and reviews the book "Great Minds of Investing." Photo: Getty

But when the “gorilla” starts rattling the cage it’s hard not to get irritated by the racket. Fuld made a public appearance last Friday that confirmed the worst fears of those who may have hoped the financial crisis may have served as a lesson to Wall Street brass, that the bankruptcy of iconic banks and government bailouts of others might have brought some humility to them.

Fuld, Lehman’s former chairman and chief executive, said it best when he replied to one questioner asking why Fuld continued to pursue a Wall Street career. Fuld’s response: “Why don’t you just bite me?”

Ok. On the one hand it’s encouraging to see that one of Wall Street’s most colorful bullies still has his edge. After living in the middle of the Bay Area’s self-congratulatory, overbearing technology boom for a couple of years, it’s refreshing for me to hear that old Wall Street candor again. Bankers and brokers are nothing if not direct. You always know where you stand. It’s one of the industry’s best attributes.

On the other hand, it’s a fine line between being blunt and being a belligerent boor.

Fuld doesn’t always walk that line well, a problem compounded by his analysis of the facts.

For example, Fuld said, referring to Lehman’s employees, “regardless of what you heard about Lehman’s risk management, we had 27,000 risk managers because they all had a piece of the firm.”

Which is like saying the Knicks would win the NBA championship if only the players owned part of the team.

Fuld also disputed the Lehman’s abrupt end seven years ago. He said Lehman was “mandated into bankruptcy” and that its equity capital was $28 billion. Fuld has a strange view that Lehman is unique because it was forced into bankruptcy.

Guess what? Everyone in bankruptcy was forced into it by creditors. Just like Lehman. Lehman had $613 billion in debt when the investment bank filed under Chapter 11 of the U.S. Bankruptcy Code. Does Fuld think anyone was going to lend an investment bank and bond house money with a 613-to-28 ratio of debt-to-equity capital?

Fuld’s insistence on denying reality, even after seven years, is the reason Lehman is a casualty of the financial crisis and not a survivor. The real story: After the emergency sale of Bear Stearns Cos. in 2008, Lehman and Fuld ignored the steep losses the brokerage was suffering. Lehman continued to use hedges to offset losses. The hedges weren’t nearly enough to assuage creditors that Lehman wouldn’t go under. Fuld wouldn’t acknowledge how bad it was and this made creditors nervous.

That’s why it was so easy to write in a June 2008 MarketWatch column, published months before Lehman failed, that: “Lehman received a temporary reprieve from the Federal Reserve’s decision to lend to brokerages. To many, the government’s backing would allow Fuld to give the go-ahead to raise capital, sell assets and unwind some of the poison in its system.

“But it either didn’t happen or didn’t happen fast enough. And pretty soon, David Einhorn, a hedge fund manager at Greenlight Capital, was pounding Lehman in speeches, interviews and on TV. Einhorn was honest. He was shorting the stock, but he also had the numbers to back him up.”

Ultimately, Fuld can continue to blame the short-sellers, the hedge fund guys and Lehman’s rivals for pushing the firm asunder. But it was Fuld who was paid $22 million in 2007, handed $41 million in restricted stock, and given a package worth $51 million the prior year.

That’s the kind of sum paid to someone who’s supposed to know their market well enough to avoid getting pushed into bankruptcy. In other words, it’s the kind of money you give a true chief executive, not a gorilla.

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